Friday, March 20, 2009

When a paradigm-shifting event can happen over a couple of beers, we’ve got the makings of a couple of Heroes of Capitalism. In 1976, a venture capitalist and a scientist got together for a couple of beers and tried to design a way for this entrepreneur to invest in the scientist’s research into recombinant DNA. The objective was to develop an environment where a profit motive could accelerate research where a commercial application seemed likely.

The capitalist, Robert Swanson, believed that commercializing genetically engineered drugs was possible in the near future, as opposed to typical estimates that placed such applications as being at least a decade away. Herbert Boyer was a biochemistry and biophysics professor who had pioneered a technique to genetically alter DNA that seemed promising.

Swanson and Boyer sat down for a few beers and began to work on a business plan that would dramatically alter the way the pharmaceutical drugs would be produced. In that bar, the Biotech industry was formed. Swanson worked as CEO, marketing the idea to investors and Boyer managed the scientists. The company that Swanson and Boyer formed was called Genentech and it created the first genetically altered drug to receive FDA approval, human insulin. The basic idea of the Biotech firm is to develop the idea and do the preliminary research and testing before selling the idea to a firm that specializes in production and marketing of pharmaceutical drugs.

The idea was hugely successful for both Boyer and Swanson and was quickly copied by hundreds of small research-minded firms. The Biotech industry currently boasts over 1400 firms and represents over $40 billion in annual revenues in the US alone. Biotech firms have been responsible for over 200 new drugs and vaccines, including products to treat cancer and HIV/AIDS. Over 180,000 people worked in the Biotech industry as of 2006, and the U.S. portion of the industry is estimated to have spent over $27 billion on research and development in 2006 alone.

The moral of the story is clearly that we should all go out tonight and brainstorm while drinking a few beers. What could it hurt?